A range of private equity firms and hedge funds have yet to receive authorisation to operate under the European Union’s Alternative Investment Fund Managers Directive despite the fact it comes in to force this week.

Source: Getty Images

Many alternatives firms left it late to submit their applications to the UK’s Financial Conduct Authority, according to lawyers, meaning just 334 of a total of 927 applications had been authorised or registered by early July, according to figures released by the FCA last week.

Firms that have not had their applications approved by the FCA have been told they must still comply with the new rules when they take effect from July 22.

The FCA has said that as long as applications have been submitted before the deadline, fund managers can “continue to operate as [if authorised already]”, explained the Investment Management Association director of regulatory affairs Julie Patterson.

A spokeswoman for the FCA said that the regulator expected to process applications within the normal period of three months, or six months in the case of complicated applications.

In addition, several countries have not yet implemented the AIFMD rules. Some, including Poland, Slovenia, Portugal and Lithuania are still to enact legislation to put AIFMD in to their local laws, according to a report from KPMG released in June. Other countries have enacted legislation but the rules are still to be implemented.

This could have consequences for fund managers registered in those regions, although foreign firms are still likely to be able to market to investors based there.

A spokesman for the IcelandFinancial Supervisory Authority said that the legislation had not been put in to Icelandic law as it had not yet been incorporated in to Iceland’s free trade agreement with the EU. He added that there was a “committee working on preparations for the eventual implementation of the directive”.

A spokesman for the Financial Supervisory Authority of Norway said that the AIFMD rules would come in to force at the end of 2014.

Spokespeople for the Slovenian Securities Market Agency and the Spanish Securities Market Commission said they believed the delays in their countries would not have an impact on the alternatives industry.

Spokespeople for the financial regulators of Portugal, Poland and Lithuania did not respond to requests for comment in time for publication.

Failure to comply with the AIFMD rules, which govern areas such as how firms market their funds, disclose information and structure deals, could land fund managers with hefty fines or even jail.

Erik Jamieson, a partner at law firm Hogan Lovells, said: “There are pretty big consequences [for not complying]. If they do continue to market they are committing a criminal offence, could go to jail for two years and face a big fine.”